Twitter expected to begin layoffs and stop headquarters expansion

Published 8:30 pm, Friday, October 9, 2015

Just days after being named permanent chief executive of Twitter, Dorsey is planning a series of cost-cutting maneuvers at the social networking company, including layoffs and halting a plan to expand the company’s San Francisco’s headquarters, according to three people familiar with the plans, who spoke on the condition of anonymity because the details are private.

The plans to cut back both space and staffing are part of an effort to trim what many insiders see as an organization that has grown bloated — Twitter has more than 4,100 employees in more than 35 offices — over the past few years, these people said.

Millennial Habits May Soon Bring An End to Passwords New Study ShowsBuzz 60

Google Brings Wheelchair Routes to MapsWibbitz

A Twitter spokesman declined to comment.

The moves, with the layoffs set to come as soon as Tuesday, signal swift action by Dorsey, who was named permanent chief only last Monday. Dorsey, 38, who also co-founded Twitter, had held the interim chief title since July 1 and has had time to assess the company’s prospects, strengths and weaknesses.

He returned to a company in crisis. While Twitter went public in 2013 in a wave of hype, its stock price has more recently fallen — at one point dropping below its $26 initial public offering price — as the company has struggled to attract new users. Twitter faces intense competition for consumer attention from rivals like Instagram, Snapchat and WhatsApp, threatening its ability to attract new advertising dollars.

“Twitter is clearly going through a transition, a new CEO, new products, and this restructuring is another avenue they will need to go down,” said Brian Blau, a technology analyst at Gartner. “Reducing costs by reductions is always tough, but a better focus on execution and innovation will help them in the long run.”

Founder CEOs act fast

Moving quickly once in the executive suite is a well-worn tactic by founder chief executives who return to their company after a stint away. This year, Mark Pincus, founder of Zynga, also came back as chief executive of the games company after a period out of the day-to-day operations. Soon thereafter, he cut the staff 18 percent and exited several nonessential businesses.

At Twitter, many of the cost-cutting measures came into focus during a recent planning process for 2016, according to two people familiar with the company’s plans. Executives had just finished the discussion, these people said, and decided that trimming the fat from Twitter’s rapid expansion over the past two years would be necessary.

Twitter’s spending has been rising. In the last quarter for which Twitter reported financial results, costs and expenses totaled $633 million, up 37 percent from a year earlier.

Staff cuts in several areas

The layoffs will most likely affect multiple areas of the company, including the engineering and media teams, according to the people with knowledge of the plans. Exact numbers of those to be affected couldn’t be learned. The technology site Recode earlier reported on the layoffs.

Twitter also plans to opt out of a previously planned 100,000-square-foot expansion of its San Francisco headquarters, according to two people familiar with the company’s plans. Twitter had planned to add office space at 1455 Market St., the building directly across the street from Twitter’s global headquarters. That space also houses Square, the mobile payments startup that Dorsey co-founded and leads concurrently as chief. The decision to halt the expansion was earlier reported by the San Francisco Business Times.

Twitter’s stock had soared this week since Dorsey was named permanent chief, partly on Wall Street hopes that stability had entered the company’s executive suite. The shares rose more than 14 percent between Monday and Friday, although they fell in after-hours trading Friday after news of the layoffs emerged.

It has been a busy week for Dorsey, even without the news of the impending layoffs. On Oct. 5, he was named CEO, followed by Twitter’s releasing Moments, a new feature to draw in novices, on Tuesday. On Thursday, Dorsey appeared at an advertising event in New York to show off Twitter’s array of video advertising products.

He appears to have little desire to slow down.

“My focus is to build teams that move fast, and learn faster,” Dorsey tweeted in several messages Monday. “We’re working hard at Twitter to focus our roadmap on a few things we can make really great.”